Subsidies to replace vehicles considered

The government is mulling a plan to offer cash subsidies to people replacing their old cars or motorcycles, as policymakers aim to boost private consumption at a time when exports are dwindling.

Chinese-language newspapers yesterday reported that the Cabinet is considering offering subsidies to those who plan to replace vehicles they have used for more than 15 years.

Those who meet the requirements may receive NT$30,000 for a car, or NT$4,000 for a motorcycle, with dealers likely to sweeten the purchase by providing discounts of up to NT$10,000, reports said.

Council for Economic Planning and Development Minister Kuan Chung-ming (管中閔) said yesterday that the reported subsidies are not yet policy and the Cabinet is still considering different suggestions to boost the economy.

However, Minister of Finance Chang Sheng-ford (張盛和) said cash subsidies would be better than cutting the commodity tax to increase consumption and domestic demand, and thus help boost the nation’s economy.

“It would be more sensible to directly put the cash into a consumer’s pocket,” Chang said in a question-and-answer session at the legislature.

There are between 1.6 million and 1.7 million cars older than 15 years on the streets, accounting for approximately one-fourth of the total number of cars in the nation, while there are almost 3.5 million cars that are older than 10 years, accounting for 50 percent of the total, Hotai Motor Co (和泰汽車) deputy spokesman Yu Shiao-chung (喻曉忠) said by telephone yesterday, citing statistics compiled by the Ministry of Transportation and Communications.

Hotai, which sells Lexus and Toyota cars, is optimistic about the subsidy plan, but offered no forecast for how it would affect sales because is still pending government approval and the details are still unclear.

Fubon Securities Investment Services Co (富邦投顧) analyst Sean Ryan Hsiao (蕭文良) said a similar subsidy policy in 2004 and 2005 helped boost car sales to more than 400,000 units a year, their highest in the past 10 years.

“Customers are more careful about their spending, and they need incentives to buy new cars,” Hsiao said.

The government’s move could also raise fuel-efficiency, because old cars usually waste more gas and generate more air pollution, Chang said.

Chang said the government is not inclined to cut the commodity tax for now, because revising the law would take time and may fail to solve urgent economic issues in time.

However, providing cash subsidies can be executed much more quickly, he said

The government would pay the subsidies with part of the Air Pollution Control Fund and the Soil Pollution and Groundwater Pollution Remediation Fund, Chang said, adding that the government has not estimated how much it would pay in subsidies.